With its strong economy, stable government, multi-cultural society and good living standards, Canada is an attractive destination for HNW immigrants. And wealth managers in Canada increasingly recognise the sizable opportunity HNW and UHNW immigrants represent. Robin Arnfield reports.
Canada’s growing importance as a destination for wealthy immigrants is highlighted by the fact that in 2017 the country overtook the UK to become the second top emigration destination for China’s rich.
The US remained the top choice, according to the annual survey, which was carried out in April-July 2017 by Shanghai-based Hurun Report in association with Visas Consulting Group.
Vancouver came fifth among the top destinations for Chinese HNWIs wanting to buy property and emigrate, while Toronto climbed two places to eighth in the 2017 survey.
Nuri Katz, president of HNW immigration advisory firm APEX Capital Partners, says many HNW immigrants come to Canada for personal, rather than investment, reasons.
Katz says: “They may want their children to live in Canada, but they’ll continue to operate their business outside Canada in their country of origin,” he says. “So they’ll buy a house for their family in Vancouver and move them here, but they won’t invest here and will stay behind.”
“Most HNW/UHNW immigrants to Canada keep their operating companies abroad. Just because they immigrate to Canada doesn’t mean it’s appropriate for them to move their businesses there if their business is location-specific,” says Katz.
Katz adds that most immigrants to Canada also keep their wealth abroad for the first few years, as they need to get to know Canada better to understand where their investment opportunities are.
“Generally, even those who feel comfortable moving their wealth to Canada, do so only with a portion of their funds.”
HNW Canada data
GlobalData’s Wealth in Canada: HNW Investors 2017 report says expats accounted for 5.3% of HNW investors in Canada.
The business intelligence, data and advisory services provider says there were concerns that, after the Federal Government closed Canada’s Immigrant Investor Program in 2014 – leaving Quebec with the only dedicated investor visa – the number of HNW investors hailing from abroad would collapse. However, this has not happened.
Andrew Haslip, GlobalData’s Head of Financial Content for Asia Pacific, says: ‘’Despite the lack of a dedicated Federal visa pathway for HNW investors, with the option of pursuing entrepreneur and business visas still being available, large numbers of affluent foreigners continue to flow into the country.”
Haslip says: “No major wealth manager in Canada’s largest cities can afford to be without a proper expat proposition to target this sizable opportunity.”
GlobalData says Canada remains attractive for HNW investors due to its stability, good quality of life, proximity to the US and, since commodity prices stabilized, a rebounding economy.
“The top Canadian banks have some well-developed affluent immigrant targeting strategies,” Haslip tells Private Banker International.
He comments: “HSBC has a definite lock on UK/Hong Kong HNW immigrants, but the real story is the outreach that the big five Canadian banks are doing for Chinese, Indian, and US expats. A number of the big Canadian banks have relationships/equity stakes in Chinese banks and wealth managers so they can tap into the flow of cash out of China.
“For example, BMO took a 19.99% stake in China’s COFCO Trust Company in 2012. Obviously, with its Latin American operations, Scotiabank has a big edge on the Latin American flow.
“Most of the big five are also buying up bits of regional American banks, which helps with that market as well, although US expats are less differentiated from the general Canadian market, so the edge in having a strong US practice is a lot less.”
BMO Private Banking
David Heatherly, COO of BMO Private Banking, Canada and Asia, says BMO Private Banking offers the same full range products and services to all HNW and UHNW clients, regardless of segment, whether they are domestic Canadian clients or immigrant clients.
“Our marketing collateral is available in several languages,” Heatherly says.
“In addition, we have teams with specific language and cultural backgrounds to serve certain client segments. These teams actively promote our offerings by leveraging local connections, running events, and teaming with organizations that have a similar focus.”
In India, BMO Capital Markets has a representative office to promote BMO’s brand and global capabilities in that market, Heatherly says.
In China, BMO has several investments and partnerships including:
- A 28% interest in Fullgoal Fund Management Co., a leading Chinese fund management company;
- A 19.9% interest in COFCO Trust Co., a subsidiary of COFCO Group, one of China’s largest state-owned enterprises;
- A referral agreement with Agricultural Bank of China, one of the largest banks in China, which provides each bank’s respective clients with access to cross-border private banking financial services. This partnership delivers a seamless experience for the clients of both banks, Heatherly says.
- In November 2017, BMO signed a memorandum of understanding with China’s largest state-owned bank, Industrial and Commercial Bank of China Ltd. (ICBC). The agreement will allow BMO and ICBC to cooperate on areas such as asset management, corporate financing, and trade finance in China and Canada.
- BMO will be able to distribute its range of investment products, including mutual funds, and ETFs across China through ICBC’s banking network.
Jean-Marc Freeman, managing director and British Columbia region head for CIBC Private Wealth Management and Wood Gundy, says CIBC’s main focus for private wealth management clients is offering them an integrated, comprehensive approach to managing, building, and protecting their wealth.
He says: “For HNW/UHNW newcomers, we take the time to understand their financial goals and needs, and work with our partners in wealth management, commercial banking and capital markets to build a plan that meets their unique needs.
“In British Columbia, CIBC has dedicated Asian Private Wealth Management centres in Vancouver and Victoria providing services to Asian newcomers in Mandarin and Cantonese to make their adjustment here easier.
“We also have private bankers, investment advisers, and commercial bankers who speak a variety of Asian languages and work with newcomers to get them set up in Canada.”
Alongside Canadian private banking clients, HSBC Canada attracts international HNW customers from around the world, who may be new immigrants to Canada or want to invest in Canada.
Steve Ho, senior VP and head of HSBC Canada’s branch network says HSBC offers HNW immigrants the benefit of being a truly global bank with franchises in over 65 countries.
“All our private banking operations around the world provide similar services,” he says. “A private banking client moving from the UK to Canada will become a Canadian private banking client. We offer services such as letting clients transfer their credit history from their home country to Canada, which is unique.
“We also offer within our HSBC digital banking platform a global view of private banking clients’ accounts with us plus global money transfers between these accounts.”
Ho says HSBC Canada’s private banking operation has not seen any decline in its HNW immigrant business. “We are growing this business and are very pleased with its progress,” he says.
RBC Private Banking
“HNWIs and their families move to Canada for business, lifestyle, and family reasons, for example to give their families new opportunities and for the sake of their children’s education,” Luis Lopez, Regional Vice President at RBC Private Banking, tells PBI.
“Statistics Canada shows a slight decrease in the number of HNW immigrants since the Federal Government ended its business investor immigrant program,” says Lopez.
“But, in reality, we haven’t noticed any decline in numbers. HNW immigrants can emigrate to Canada under a number of different categories, such as family class, entrepreneur class, etc. Canada is still very attractive to HNW immigrants.”
“Although HNW immigrants come from many parts of the world, a critical mass of HNW immigrants – between 50% and 70% depending on whether you measure by people or families – come from Hong Kong and China,” says Lopez.
RBC has a planning-led model offering not just banking services and credit facilities to HNW immigrants, but also investment management, Lopez says.
“We try to work with HNW immigrant clients as they go through the process of establishing themselves here,” Lopez tells PBI.
“After we’ve met their initial need for banking and credit, we establish a trusted advisory relationship with them, for example to help them to plan for their children’s inheritance and advise them on Canadian estate laws and how these differ from their home country’s estate laws.
“In this second stage, we offer wealth management and educate them about how to use Canadian investment and savings vehicles like TFSAs (Tax Free Savings Accounts), RRSPs (Registered Retirement Savings Plans), and RRIFs (Registered Retirement Income Funds).”
Lopez adds that RBC Private Banking has around 30 private bankers in Canada who are dedicated to its HNW immigrant clients.
He says: “We dedicate significant resources to help them with wealth management, and business succession planning. Our advisors have significant language and cultural understanding of their clients.”
A spokesperson for Scotiabank Canadian Wealth Management, tells PBI its strength is its ability to tailor our wealth management offerings to meet the needs of every client’s unique life circumstances.
The spokesperson says: “To understand and serve our clients on an individual basis, our Scotia Wealth Management teams engage each client in what we call Enriched Thinking. This involves an in-depth consultation that combines our expertise with their current reality and vision for the future to help shape a holistic wealth management plan making the most sense for them.
“From an international perspective, Scotia’s HNW/UHNW clients are primarily from Latin America and the Caribbean. They hold offshore private banking accounts, deposits, and investments with Scotia as a secure means of leveraging their internationally held wealth (business, real estate, etc.) for various purposes, including further investment/reinvestment. From their perspective, Canada is both a safe and stable banking environment.
The spokesperson explains if one of these clients wishes to leverage their investments to invest inside Canada, Scotia advisers handling offshore clients facilitate an introduction to the right Scotia representative in the Canadian Wealth Management office to help make that happen as seamlessly as possible.
An example of this is an HNW offshore private banking client who sends their child to University in Canada. They leverage their offshore wealth held with Scotia Internal Wealth Management through their offshore Scotia private banking account in order to purchase real estate in Canada for their child.
- In the past, the Canadian Government has operated various programmes to encourage HNWIs to invest in and emigrate to Canada. There are currently no Federal immigrant investor schemes in place, although the province of Quebec continues to operate its own scheme, limited to a quota of 1,700 successful applicants a year.
- The Federal Immigrant Investor Program was cancelled in 2014, as it brought little economic benefit to Canada.
- In 2015, the Canadian Government tested demand for a new investor program, the Immigrant Investor Venture Capital (IIVC) Pilot Program, which aimed to attract experienced immigrant investors.
- Demand for this pilot program was low and it was closed in the same year. There are currently no plans to reintroduce a new immigrant investor program.